China to Crypto Miners: Time to Make an “Orderly Exit”

Recently, the Wall Street Journal issued a report saying that China has ordered its “army of Bitcoin miners” to cease all operations.

This latest announcement comes in the wake of last week’s reports from Bloomberg and Reuters that China was planning to limit the amount of electricity allotted for the mining of cryptocurrency.

China has a very storied history when it comes to cryptocurrency bans. In September, the country banned ICOs and domestic exchanges in a set of bans that sent the global cryptocurrency markets spiraling.  Rumours that the Chinese government was planning a mining ban originally circulated in late 2017, although they were proven to be false at the time.

The reason for the order, which said that BTC miners should make an “orderly exit” from China, was revealed in a leaked memo dated January 2, 2018. In addition to using up “huge amounts of resources,” the memo accused miners of “[stoking] speculation of ‘virtual currencies.’”

Chinese miners were told that although their exit could be “gradual,” they needed to “make a plan” before January 10th.

The memo came from the “Leading Group of Internet Financial Risks Remediation,” the same regulator that set China’s original set of crypto-related bans into motion. While the group does not have any control over the regulation and distribution of electricity in China, TechCrunch reported that it is “an influential political vehicle” that happens to have Pan Gongsheng, deputy governor of the People’s Bank of China, at the helm.

The memo, which was eventually confirmed as true by Quartz, was originally posted on Twitter by blockchain industry executive Elly Zhang.  

Notice from China special rectification on risks in Internet Finance department to local government to make a plan before Jan 10th – “ lead mining factories quit gradually” #btc #bitcoin #BitcoinMining with Central Bank official Chop. Prepare for the roller coaster!!!! pic.twitter.com/OLv8j1veHb

— 🎀 (@cryptovenus) January 5, 2018

Because of cheap electricity costs, China has long been one of the world’s most prominent BTC-producers–Singaporean news source The Straits Times reported that China is responsible for the production of as many as three-fourths of the world’s total Bitcoin supply.

Accordingly, Chinese mining industry does indeed use a “huge amount of resources”.  According to one controversial report, the energy needed to power the Bitcoin network is greater than or more than the energy needed to power 159 individual countries.

However, cheap electricity costs in China have been offset in the past by political instability with regards to cryptocurrency.  As a result, Chinese mining operations have been relocating elsewhere in the world over the past several months; Bloomberg reported that Chinese mining-collective operator Bitmain was already setting up operations in Singapore, the US, and Canada. ViaBTC has operations in the US and Iceland.

Coindesk reported just yesterday that the Canadian Quebec region has become a particularly attractive site for crypto mining because of the region’s access to cheap electricity from sustainable sources–the region is one of the world’s largest producers of hydropower.

It seems that this really may be the end for cryptocurrency in China. Rumors that some of China’s crypto bans may be reversed circulate every now and again–for the moment, however, the future doesn’t look so bright.